Further supplementary memorandum submitted
by WRAP (the Waste & Resources Action Programme) (Waste 50b)
WASTE STRATEGY
FOR ENGLAND
2007 INQUIRY: THE
ROLE OF
EXPORT MARKETS
Thank you for your letter of 21 October, following
my appearance in front of the Committee on 15 October. This letter
responds to your questions, and outlines:
By way of introduction, it is worth highlighting
that government policy recognises the part that export markets
play in the UK's overall waste strategy. Defra's Waste Strategy
for England 2007 gave WRAP the remit to develop "a centre
of expertise on export markets to help businesses manage the market
risks, maintain the value of recycled material and comply with
the controls on export of waste". This was not a remit to
promote exports, but to ensure that all those involved in recycling
had access to good information on which to make their decisions.
WRAP's view is that both domestic and export markets have a role
to play in the environmentally and economically sound management
of materials for recycling, and that an unbalanced reliance on
one market or the other will prejudice our ability to achieve
that.
IMPACT OF
GLOBAL MARKETS
In 2007, around 110 million tonnes of material
were recovered from the UK waste stream for recycling and reprocessing.
Of this, 97 million tonnes (88%) were recycled in the UK (of which
71 million tonnes were aggregates), and 13 million tonnes (12%)
were exported for recycling. Of the 6.3 million tonnes of packaging
materials recovered for recycling and reprocessing, 2.3 million
tonnes (37%) were exported.
The materials exported for recycling are predominantly
high value commodities whose virgin equivalents are also traded
in international markets. This includes:
— ferrous metals (6 million tonnes
exported in 2007);
— paper and board (4.7 million tonnes);
— aluminium (0.9 million tonnes);
— plastics (0.55 million tonnes); and
— glass (0.25 million tonnes).
The destination of the material sent for recycling
and reprocessing is determined by a combination of legal restrictions
(discussed below) and the economics: in particular, the interaction
between demand from the importing country, and the costs associated
with shipping the material to that destination. These costs can
be a significant fraction of the value of the materials.
For recovered paper and plastics, by far the
main destination for the materials is China. China accounts for
over half of recovered paper exports, while over 80% of recovered
plastics exports are destined for China, mainly via Hong Kong.
For metals, aluminium exports largely go to Asia, with a large
proportion of the materials destined for Malaysia, as well as
China. End markets for recovered ferrous metals are more diverse
and include Europe (in particular, Spain and Turkey) and Asia.
For glass, the main destination is container manufacturers in
Europe.
The emergence of China as a major end market
for UK recovered materials reflects the rapid industrialisation
of the Chinese economy, and its growing need for raw materials
of all kinds. Until recently, Chinese manufacturers have been
willing and able to pay higher prices for materials than other
buyers. This has been one of the key factors driving the broad-based
increases in commodity prices—including recovered materials
prices—observed during 2007 and early 2008. On one view,
this increase in prices has undermined the economic viability
of some UK recycling capacity. However, the alternative view is
that it has supported the rapid expansion in domestic recycling
which would otherwise have been stifled by a lack of processing
capacity for recovered materials.
The slowing in the global economy has also been
one of the key triggers for recent dislocation in the markets
for recovered materials. Economic growth is slowing sharply worldwide,
including in the UK and our principal export markets. One aspect
of this is that commodity prices, which surged to historic highs
over 2007 and the first half of 2008, have fallen sharply in recent
weeks. Although the pattern is most strikingly true of oil, it
also holds for a number of other commodities including metals,
paper pulp and primary plastics—and for recovered materials.
The same is also true of shipping costs, which form a key part
of the cost base for exported recovered materials. Conditions
in commodity markets—including recovered materials markets—are
extremely volatile at the moment. The implications of this volatility
for the recycling rate and the net cost of recycling systems in
the UK are not presently clear.
POLICY AND
REGULATORY ENVIRONMENT
For the sake of clarity, it is worth recording
that policy on waste shipments to and from the UK is the responsibility
of Defra, while the regulatory control system is the responsibility
of the Environment Agency (in England and Wales), SEPA (in Scotland)
and the Department of Environment for Northern Ireland.
There are a range of different levels of regulatory
control that can apply to waste exports from the UK, ranging from
outright prohibition to the low-level "green list" controls
which apply to certain wastes being sent for recovery. This control
system is implemented across the EU by the Waste Shipments Regulation
(EC/1013/2006). Further information about the UK's policies and
controls can be found on the Defra[10]
and Environment Agency[11]
websites.
It is important to note, first of all, that
exports of waste from the UK for disposal are prohibited (save
in some very limited and exceptional circumstances). In general,
only exports for recovery are allowable.
Many commodity type wastes, such as clean waste
paper, can be exported freely to many countries, including countries
outside the EU, under relatively light regulatory controls (the
"green list" controls mentioned above), provided the
waste is destined for recovery to broadly comparable standards
to those applying in the EU. The rules are not intended to
curtail this legitimate trade; indeed, any attempt to do so would
be likely to put the UK in breach of its international obligations
on free trade. Many such waste exports occur entirely legally
without the need for any permission or consent from UK regulators.
The trade in hazardous and other, more problematic,
wastes (such as mixed household waste) is much more heavily regulated. Generally,
such wastes can only be sent to other EU or OECD Member State
countries (that is, it is illegal to export such waste to non-OECD,
developing countries, even for recovery), and even then, they
can only be exported if prior permission is obtained from the
relevant regulatory authorities before the waste is shipped.
In addition to the legal controls in place in
the UK and EU, importing countries may impose their own additional
controls on the import of waste to their jurisdiction. For more
details on these, please refer to WRAP's recently published report
"International Trade in Recovered Paper and Plastics: International
Regulations and Commercial Practice"[12].
It is worth noting that, in order to demonstrate
compliance with the recycling targets in the EU Packaging Waste
Directive (94/62/EC), packaging material exported from the UK
for recycling generates Packaging Export Recovery Notes (PERNs)
on the same basis as the Packaging Recovery Notes (PRNs) generated
by domestic recycling of packaging materials. (Background on this
can be found on Defra's website: www.defra.gov.uk/environment/waste/topics/packaging/compliance.htm.)
One possible criticism of this arrangement is that it inhibits
the use of the income generated for developing recycling infrastructure,
instead encouraging price support for collected materials.
WRAP'S ACTIVITIES
WRAP has been actively involved in supporting
the recycling and reprocessing industry in the UK, in particular
by encouraging the development of sustainable end-markets for
recycled materials, and investments in reprocessing capacity where
market failures would otherwise prevent investment. However, as
the volumes of recyclate collected have risen, export markets
have acted as a complement to domestic markets. However, the situation,
and the dependence on export markets, varies widely across materials.
The UK recovers more paper for recycling than can
be used by the UK paper industry—in part because we import
a lot of the paper we consume. In 2007, the UK consumed around
13 million tonnes of paper, but manufactured only 5 million tonnes
(using around 4 million tonnes of recovered paper in the process).
By comparison, around 8.5 million tonnes of UK waste paper was
recovered for recycling; some here, and some abroad. There is
little opportunity to increase domestic recycling of recovered
paper, so here, exports complement rather than substitute for
the domestic market.
For plastic bottles, opportunities for investment
in domestic capacity have, until recently, been limited by the
availability of collected materials of the quality needed by domestic
recyclers, and by the economics of sorting. Exports to China have
provided an interim market until a critical mass of bottles could
be collected to justify factories being built in the UK to recycle
them. But investment in UK reprocessing capacity is now taking
place. Over the past couple of years, domestic plastic bottle
recycling capacity has increased from around 30,000 tonnes per
annum to around 150,000 tonnes per annum, and it is likely to
increase to around 250,000 tonnes per annum by the end of the
year. This will divert the vast majority of waste plastic bottles
in the UK away from export.
WRAP has also investigated the environmental
impact of exporting recovered materials to China. In a report
released this summer ("CO2 impacts of transporting the UK's
recovered paper and plastic bottles to China"), WRAP concluded
that there are net benefits from recycling paper and plastic bottles,
compared to landfilling them, even if they have to be shipped
as far as China to be recycled.
We believe that achieving a diversified set
of end markets is important to ensure stability of demand for
UK material. We have, therefore, been supporting the expansion
of domestic recycling capacity, and the development of local end
markets for recycled material. For example, we have provided support
to companies investing in domestic plastic bottle processing capacity,
and we have developed the first process to recycle plastic milk
bottles into new milk bottles and other food grade applications.
We also recognise, however, the key part that export markets play
in ensuring there are sufficient sustainable end markets for the
materials collected in the UK.
One crucial element, both for the domestic and
the export markets, is the quality of the material provided by
the recycling supply chain. Lower quality material, even if it
is legally acceptable for export, risks being rejected by importing
countries when demand slows. For this reason, WRAP has embarked
on a programme to improve the quality of material provided by
UK Materials Recovery Facilities (MRFs), starting from the quality
of the materials delivered from households, and including the
systems in place in MRFs to manage quality. Ensuring the best
possible quality throughout is one of the key ways to foster the
development of sustainable domestic markets and reliable access
to export markets.
Finally, in view of the Committee's interest
in the commercial and industrial waste sector, you may wish to
draw their attention to a WRAP initiative, announced since I gave
evidence, to halve the amount of construction waste sent to landfill
by 2012. This is being implemented through a voluntary agreement
similar to the successful Courtauld Commitment, agreed between
WRAP and the retail sector. It was launched on 16 October, and
has already attracted the support of 14 major organisations within
the construction sector. More details are available on our website
(www.wrap.org.uk/construction/halve—waste—to—landfill),
or from Patrick Mahon, WRAP's Policy Analyst.
Philip Ward
Director for Local Government Services
WRAP
November 2008
10 www.defra.gov.uk/environment/waste/strategy/int-shipments.htm Back
11
www.environment-agency.gov.uk/wasteshipments Back
12
www.wrap.org.uk/businesses/market-knowledge/international-markets-event-2008 Back
| 
